Expanding Outside Your State: Part 1
As you know, team expansion is the new, dynamic approach to maximizing production and income. It enables agents to expand their businesses into other markets across their states, nationwide and internationally.
However, this new frontier in real estate team development raises a multitude of new questions and requires a lot of careful consideration. It’s clear that your #1 requirement for expansion is that you are presently generating a solid profit. If you aren’t profitable in your local market, you have no business opening another location because it will mean putting your hub at risk.
Assuming you are on solid financial footing and have enough money put away to meet your financial obligations for at least six to nine months, it might be time to consider expansion. One of the first decisions you’ll want to make is what market you’ll want to expand into.
This is a tricky but crucial step. Living in Alaska, I understand the inclination to open your second location in some warm, tropical paradise. However, it begs the question: At what point do you consider expanding your real estate business outside of your state?
Let me share a cautionary tale.
When we expanded from Wasilla into Anchorage, it seemed ridiculously easy. It was so easy, I thought I was a genius. Organically, the leads flowed naturally. We are within 35 minutes of Anchorage, the average listing was $100,000 higher, and the turnover ratio was much quicker. It produced an immediate result. It felt like expansion was easy.
The problem for me? There wasn’t another opportunity to duplicate that same expansion within the state of Alaska, so the obvious answer seemed to be going outside the state.
What I didn’t realize is that expanding outside your state is a whole different animal. The moment you cross a state line, the complexity – licensing laws, the MLS rules, the distance…almost everything – expands exponentially.
Yes, you have the hub at your home base…that well-oiled machine…up and running, but you still have to produce leads in another location and manage the transaction under different licensing laws. It becomes a lot more complicated and less profitable when you cross the state line.
Most states have a lot more opportunities for expansion within their borders than Alaska does, so I would advise expanding locally within the state before I’d ever consider crossing a state line.
However, I didn’t know what I didn’t know. So, what do you consider when everything is in place to expand and you’re out of in-state options?
Let’s analyze a specific location…say, in Arizona. We actually have a location in North Scottsdale, and let’s say I wanted to expand down into Chandler in the East Valley. One downside is it’s at least a 45 minute drive, and with traffic it could easily take an hour and fifteen minutes.
However, we do have a market center in Chandler, so it might be a great expansion area for us, but only under certain circumstances. Say, for instance, we suddenly had a lot of Chandler leads. Or, perhaps, a talented person with a sphere of influence and an extensive database wants to be in business with me in Chandler because they need our lead gen machine, our admin team and my leadership skills to get them where they want to be faster.
Those would be good reasons for me to expand into Chandler.
On the other hand, if that same person said they’d like to expand into Chandler because they have a cousin there and they’ve always wanted to have a vacation home in Chandler, those would be good reasons for me to run in the opposite direction.
Stay tuned for Part 2